Iceland: Government Falls Because of Credit Crunch

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The Icelandic government, after months of increasingly angrier demonstrations and violence, has fallen and called for an election. The prime minister, Geir Haarde, called for a May general election (he did not have to call an election until 2011).

Haarde also revealed that he had been diagnosed with a malignant tumour of the oesophagus and would not seek re-election.

'I have decided not to seek re-election as leader of the Independence Party at its upcoming national congress,' he told a news conference.

The Icelandic economy is set to shrink by ten percent this year, and unemployment is soaring. Many young people are planning to leave the volcanic island because job prospects are so bleak.

On Thursday, police used teargas on demonstrators for the first time since protests against the North Atlantic island's entry into the NATO alliance in 1949.

Special forces had to rescue Haarde from his car after he was surrounded by an furious mob hurling eggs and cans outside the government offices, in Reykjavik.